UCLA economists: State slowly leaving recession

But growth is lower than previously thought

With California’s economy continuing to slog through the doldrums, UCLA’s Anderson Forecast slightly downgraded its outlook, saying the state’s unemployment rate will remain in the double digits for the next two years.

Nevertheless, the quarterly forecast found that “all of the evidence suggests that California is ever so slowly coming out of the recession” — although there will likely be a two-track recovery, with the coast improving faster than the state’s interior.

The forecast’s predictions include:

Employment: During the second quarter, California added 47,000 jobs, slightly ahead of the forecast’s previous prediction of 33,000. But the growth is uneven, with coastal Southern California being the only region showing positive net job formation in the first half of 2010, including 10,400 new jobs in San Diego County on a seasonally adjusted basis. But some areas of the state continue to decline.

Jobless rate: Even though jobs are growing along the coast, the growth is not occurring fast enough to employ the 1.3 million Californians who have lost their jobs since the recession began, let alone the steady stream of new job seekers entering the workforce. As a result, the forecast said, unemployment will not dip below 10 percent until the end of 2012.

Construction: New building permits in California continue to be at near-record low levels, only slightly ahead of last year, which was the worst on record. “The only good news in this is that it is hard to imagine (construction permits) falling any lower,” said UCLA economist Jerry Nickelsburg, who authored the California section of the report. The Anderson Forecast predicts that permits will gradually pick up through 2012 but that next year’s total will be far below pre-recessionary levels.

Trade: Port traffic has picked up after a sharp dip during the recession, filling warehouses in Los Angeles, Long Beach and Oakland. “If the current rate of increase holds for the balance of the year, seaport traffic will return to pre-recession levels by the new year,” Nickelsburg said.

Best sectors: The report projects the recovery will be driven by education, health care, exports and technology, and to a lesser extent by an increase in residential construction. Since the first four industries are more heavily centered along the coast, California will likely have a two-track recovery, with the coast rebounding while the inland areas remain sluggish.

The Anderson Forecast — one of the state’s best-known teams of economists — has been more optimistic about the economy than many of its peers. It was slow to predict the recession, and during the past year it has repeatedly revised its predictions downward. In March, for instance, the forecast predicted employment this year will be 0.4 percent lower than 2009 but will rise by 2.3 percent next year. That’s been revised to a 0.7 percent decline this year and a 1.8 percent rise in 2011.

Nickelsburg conceded that “the current forecast is slightly weaker” than previous forecasts. He said “conditions are ripe for (a recovery) to happen soon, but the inertia of bouncing along the bottom has pushed this out until the second quarter of 2011.”